8/17/2019 Introduction to the Islamic Financial System

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Introduction

An Overview of the Islamic Financial System.

An economic system is a collection of institutions, policies, and rules set up by society. Itdeals with the allocation of resources, exchange of goods and services and trading and

distribution of wealth.

The Islamic economic system shares the key characteristics and objectives of a conventional

economic system. The additional and vital factor is the Sharī‘ah’s rules, which are designedby  Allâh (swt ), sensationalized through the Sunnah,and made contemporary by the Ijtihad .

The Islamic economic system adopted in various countries may vary with regard to some

policy decisions taken by legitimate national authorities. However, the core rules and

institutions must be the same. All policies, transactions, contracts and economic activitiesmust be Sharī‘ahcompliant.

Learning Objectives

!n completing this chapter, you will be able to"

•  #escribe the core principles of an Islamic economic system.

•  Identify the characteristics of an efficient financial system.

•  #escribe the roles of financial institutions.

•  $xplain the two main tasks for financial institutions.

•  Identify the different types of financial markets.

•  $xplain the role of ethics, and how differences, areas of conflict, and priorities are

managed in an Islamic financial system.

•  Describe the concept of a contract and the core types of contracts including to types

of transnational contracts and four types of !nancing contracts that are at the core of anIslamic !nancial system.